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SINOPEC OILFIELD SERVICE CORPORATION
SSC
SSC
中石化石油工程技术服务股份有限公司SINOPEC OILFIELD SERVICE CORPORATION
March, 2017
2016 Annual Results Presentation
SINOPEC OILFIELD SERVICE CORPORATION
SSCDisclaimer
1
The information contained in this document has not been independently verified. No representation or warranty
expressed or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or
correctness of such information or opinions contained herein. The information contained in this document should be
considered in the context of the circumstances prevailing at the time, is subject to change without notice and has not
been, and will not be, updated solely to reflect material developments which may occur after the date of the
presentation. It is not the Company’s intention to provide, and you may not rely on these materials as providing, a
complete or comprehensive analysis of the Company, or its financial or trading position or prospects. Neither of the
Company nor any of its affiliates, advisers or representatives shall have any liability whatsoever (in negligence or
otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in
connection with this document.
This document contains statements that reflect the Company’s current beliefs and expectations about the future as of
the respective dates indicated herein. These forward-looking statements are based on a number of assumptions about
the Company’s operations and factors beyond the Company’s control and are subject to significant risks and
uncertainties, and accordingly, actual results may differ materially from those described in these forward-looking
statements. The Company undertakes no obligation to update these forward-looking statements for any events or
developments including the occurrence of unanticipated events that occur subsequent to such dates.
This document does not constitute, in whole or in part, an offer for subscription or for sale or invitation to purchase or
subscribe for any shares of Sinopec Corp., Sinopec Oilfield Service Corporation and related companies on any
exchanges. No part of this document shall form the basis of or be relied upon in connection with any contract or
commitment whatsoever.
SINOPEC OILFIELD SERVICE CORPORATION
SSC
Table of Contents
Section 1: Operations In 2016
Section 2: Financials In 2016
Section 3: 2017 Outlook
SINOPEC OILFIELD SERVICE CORPORATION
SSC
Section1. Operations in 2016
SINOPEC OILFIELD SERVICE CORPORATION
SSC
4
Overview
Advanced Equipment• Geophysics: 35 sets of 428XL seismic acquisition equipment, 29,440 full digital seismic 3C
geophones, 3 offshore geophysical vessels
• Drilling: 737 onshore drilling rigs,of which 262 for wells at depth of more than 7,000 meters and 13
offshore drilling platforms
• Logging:117 image logging systems, 140 rapid logging platforms, 489 sets of comprehensive
logging instrument
• Downhole operation: 140 sets of type-2500 and type-3000 fracturing assembly, 46 sets of workover
rigs with power higher than 750 HP, 6 offshore operation platforms
Strong R&D capability
• 2 academicians of the Chinese Academy of Engineering
• 64 professor-level researchers and more than 1,300 senior researchers
• 3,600 research, design, laboratory and development
staff
• 3 research institutes
• 5 design companies
• 51various professional
technical institutes
Rich Experience Fuling shale gas project: the first successful commercial shale gas project outside North America
Puguang gas field project:the largest marine-facies high-sulphur gas field in China
Exploration and development project of multiple reservoirs in Shengli Oilfield:the second
largest oilfield in China
Tahe oil field project: large oil field with1.2 billion-ton reserve
Yuanba gas field project: the deepest marine-facies reservoir in China
E’bei oil and gas field project: the first horizontal well construction demonstration area in China
Special
Prize
National Science and
Technology Progress
Award 2012&2013
Golden Prize of the
National Quality
Engineering
Technologies for safe and efficient
development of extra-large ultra-
deep high acid gas fields &
industrial applications
Sichuan-East
China Gas
Transmission
Pipeline Project
Geophysics Drilling EngineeringLoging and Mud
Logging Downhole OperationEngineering Construction
SINOPEC OILFIELD SERVICE CORPORATION
SSCOperations in 2016
Operating Revenue of 2016
5
51,119 37,502
22,550
11,366
8,939
7,362
16,508
13,908
13,012
0
20,000
40,000
60,000
80,000
100,000
2014 2015 2016
Inside SINOPEC Domestic clients other than SINOPEC Overseas
60,349
30%
17%
53%
42,924
RMB:Million
78,993
Net Profit of 2016(ASBE) RMB:Million
BRENT Oil Price Trend
USD/Barrel
62%
15%
23%
65%
14%
21%
98.9
52.3
43.6
20
40
60
80
100
2014 2015 2016
SINOPEC E&P Capex
100 Million
802
547
322
200
300
400
500
600
700
800
900
2014 2015 2016
2,425
24
(16,115)-18000
-14000
-10000
-6000
-2000
2000
2014 2015 2016
SINOPEC OILFIELD SERVICE CORPORATION
SSCPerformance by Segments
Geophysics Drilling Engineering
Logging & Mud Logging Downhole Operation Engineering Construction
Drilling Footage(10,000m)
Completed Contract(RMB 100 million)
Downhole Operation(well times)
6
Mud Logging Footage(10,000m)
Standard Meter for Logging(10,000m)
2D Seismic(km) 3D Seismic(km2)
43,728
14,172
0
10,000
20,000
30,000
40,000
50,000
2015年 2016年
14,541
12,641
11,500
12,000
12,500
13,000
13,500
14,000
14,500
15,000
2015年 2016年
810
551
0
200
400
600
800
1000
2015年 2016年
23,360
15,870
0
5,000
10,000
15,000
20,000
25,000
2015年 2016年
905
531
0
200
400
600
800
1000
2015年 2016年
5,409
4,396
0
1,000
2,000
3,000
4,000
5,000
6,000
2015年 2016年
146
121
0
20
40
60
80
100
120
140
160
2015年 2016年
67.6% 13.1%
32.0%
32.1%
41.3%
18.7% 17.1%
2015
20152015
20152015
20152015 20162016 20162016
201620162016
SINOPEC OILFIELD SERVICE CORPORATION
SSC
7
Expand Market
Overseas market: new contracts valued 2.38 billion USD, completed contracts valued 2.12 billion USD
and backlog contracts valued 5. 1 billion USD
Inside Sinopec: new contracts valued 21.2 billion Yuan and completed contracts valued 22.5 billion Yuan
Provided service for key projects such as Fuling Phase II, Weixi Block, E’bei and Shunbei Oil and Gas Field Construction
with advanced technology and experienced crews
Cooperated with clients against harsh conditions and consolidated market share with drilling share exceeding 96%
Domestic Market outside Sinopec: new contracts valued 9.02 billion Yuan and completed contracts
valued 7.78 billion Yuan
Signed strategic cooperation agreement with Guizhou Energy Agency and Shaanxi Gas Group
Awarded 34 wells projects by CNPC and CNOOC, 14 parameter wells projects and 13 onshore seismic project by China
Geological Survey Bureau
Entered oil tank construction market of State Reserve Bureau and natural gas pipeline construction market in Hunan
Insid
e
Sin
op
ec
Do
mestic O
utsid
e
Sin
op
ec
Overse
as M
ark
et
10.76.1 4.4
12.9
2.6 3.2
0
10
20
Middle East Africa America
New contracts Completed Contracts
Billion USD
In Kuwait: 8 rigs contracts newly signed,18 rigs renewed, a
total of 53 rigs. In Saudi Arabia, 15 rigs contracts newly signed or
renewed, a total of 51 rigs
In Algeria, 8 rigs contracts newly signed, a total of 9 rigs. In
Kenya, road upgraded project awarded
In Ecuador, ITT(Phase I) 40 wells drilling & completing projects
awarded. In Bolivia, 4 seismic projects awarded
SINOPEC OILFIELD SERVICE CORPORATION
SSC
8
Jiangsu Co. Huadong Co. Huadong Co.
Henan Co. Huabei Co. Huabei Co.
Co
rpo
rate
Level
Reg
ion
al/S
pecia
lized
Co
mp
an
y L
evel
Reduced :
regional companies by 2
subsidiaries by 7
functional departments by 35
XinanBranch
Yunnan Branch
ZhongnanBranch
NanfangBranch
Geophysical Co. Engineering and Construction Co.
ZhongyuanEngineering
ZhongyuanSupervision
Henan Engineering
ZhongyuanE&C
Huanghe DrilllingSubsidiary
Bohai Drilling Subsidiary
Reform and Restructure
Shengli Co.
6 drilling branches
121 drilling crews
2113
1978
1900
2000
2100
2200
2015 End 2016 End
135 crews reduced in 2016
JianghanOilfield
Construction
JianghanConstruction
JianghanE&C
SINOPEC OILFIELD SERVICE CORPORATION
SSC
9
Tap Potential and Enhance Efficiency
Cut 1.33 Billion Yuan of administrative
expenses, labor cost and procurement cost
Reduce headcount by 17,600
Actual Capex 1.34 Billion Yuan
Reduced Capex by 2.11 Bilion Yuan
Capital Expenditure in 2016
RMB: Million Unit: Thousand
93.5
469.6
14.4
276.4
35
60.5
386.5
销售额
Geophysics
Drilling
Logging & MudLogging
Downhole
EngineeringConstruction
Offshore
Others
Headcount in 2016
106.2
88.6
0
20
40
60
80
100
120
2015 End 2016 EndHeadcount
SINOPEC OILFIELD SERVICE CORPORATION
SSCTechnology R&D
10
Upgrade fast and optimal drilling technology in complex formation, deep and ultra-deep wells. Support the
piedmount tectonic belt evaluation in Chuandongbei and exploitation in Shunbei. Mashen No.1 well create
the deepest well record in Asia with a depth of 8418 meters.
Completed field test of high temperature (175℃) bearing MWD system in 1-7H ultra-deep horizontal well
in Shunbei, indicating great progress has been made in high-end measurements-while-drilling tools
research & development.
Completed field test of high performance water-base drilling fluid in shale gas well, increasing drilling rate
by 20%. Upgrade lost circulation prevention and plugging technology, one-time-success plugging rate
increased from 40% to 82.6% in Hangjinqi area
The broadband seismic acquisition technique based on vibroseis is widely used in the desert area and the
frozen soil region, improving the quality of seismic data .
Proprietary SINOLOGO900 Net working Image Logging Instrument was successfully tested; complete
field test of Gamma Imaging Tool used in LWD in Ying66-Xie98 well.
Fuling Shale Gas Technologies
R&D and Site Applications
Constructed proprietary wells engineering technology system such as fast and optimal shale
gas well drilling, high performance water-base drilling fluid for shale gas horizontal well,
reservoir identification and production evaluation, environmental protection etc., developed 14
series of core technologies. Compare with the beginning of construction, average completion
period reduced by 33.4%, fracturing and testing period reduced by 56.8%.
14 invention patents filed, 14 utility model patents granted, 16 standard specification formed, 2
software copyright obtained.
Enhance Technology Innovation
Patents 379 patents granted ,465 patents application filed
Science and Technology Awards “Super High Pressure and High Power Oil and Gas Fracturing Unit Research and its Cluster
Application”won Second Prize of National Science and Technology Progress Award;
Deviation Control PDC Drill Bit won national excellent patent.
SINOPEC OILFIELD SERVICE CORPORATION
SSC
Section 2. Financials in 2016
SINOPEC OILFIELD SERVICE CORPORATION
SSCMain Financial Indexes
12
RMB:Million
Operating Cash FlowTotal Assets and Net Assets
81,296 85,30874,493
18,69624,637
8,442
0
20,000
40,000
60,000
80,000
100,000
2014 2015 2016
Total Assets Net Assets
6,746
2,576
-3,907 -4000
-2000
0
2000
4000
6000
8000
2014 2015 2016
Net cash flow from operating activities
RMB:Million
RMB:Million
Operating Revenue
78,993
60,349
42,924
0
20,000
40,000
60,000
80,000
100,000
2014 2015 2016Operating Revenue
% of Revenue from Business outside Sinopec Group
20.9% 23.1%30.3%
14.4%14.8%
17.1%
0%
10%
20%
30%
40%
50%
2014 2015 2016
% of revenue from domestic business outside Sinopec Group
% of revenue from overseas business
37.9%
47.4%
35.3%
SINOPEC OILFIELD SERVICE CORPORATION
SSCRevenue and Gross Profit of 5 Major Business Segments
13
Operating Revenue
5,066 5,285
3,606
2014 2015 2016
Gross Profit Margin% of Revenue
Geophysics
Drilling
Logging and Mud Logging
DownholeOperation
Engineering Construction
39,00328,561
19,369
2014 2015 2016
RMB:Million
91%
9%
54%
46%
96%
4%
91%
9%
70%
30%
12.9%8.3%
-16.7%-20%
0%
20%
2014 2015 2016
12.9%8.4%
-28.3%-40%
-20%
0%
20%
2014 2015 2016
21.2%16.1%
-33.4%-40%
-20%
0%
20%
40%
2014 2015 2016
10.7% 11.7%
-23.5%-30%
-20%
-10%
0%
10%
20%
2014 2015 2016
6.0% 7.6%
-24.9%-30%
-20%
-10%
0%
10%
2014 2015 2016
4,1772,446
1,538
2014 2015 2016
8,4586,916
3,868
2014 2015 2016
19,876 15,37912,827
2014 2015 2016
654 436
-603
2014 2015 2016
5,039 2,383
-5,472
2014 2015 2016
887
393
-514
2014 2015 2016
908 808
-908
2014 2015 2016
1,189 1,170
-3,199
2014 2015 2016
Gross Profit
SINOPEC OILFIELD SERVICE CORPORATION
SSCCost and Profitability Analysis
14
RMB:MillionGross Profit
2,425
24
-16,115
3.07% 0.04%
-37.54% -40%
-30%
-20%
-10%
0%
10%
-20,000
-15,000
-10,000
-5,000
0
5,000
2014 2015 2016
Net Income Net Margin
RMB:MillionNet Income
53,988 53,037
0
10,000
20,000
30,000
40,000
50,000
60,000
Major Business Cost
2015 2016
4,105
657
3,904
477
0
1000
2000
3000
4000
5000
Sales & AdministrationExpenses
Financial Expenses
2015 2016
RMB:MillionRMB:MillionOperating Cost Sales, Administration and Financial Expenses
9,289
5,780
-10,592 -15,000
-10,000
-5,000
0
5,000
10,000
15,000
2014 2015 2016
Gross Profit
11.76%9.58%
-24.68%-30%
-20%
-10%
0%
10%
20%
2014 2015 2016
Gross Profit Margin
Gross Profit Margin
SINOPEC OILFIELD SERVICE CORPORATION
SSCAnalysis of Solvency
15
Structural Condition of Assets and Liabilities
77.0%
71.1%
88.7%
15.5%
15.0%
24.3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2014 2015 2016
Debt-to-asset Ratio
Interest Bearing Debt to Asset Ratio
22,200
11,733
Credit Facility for loan from Sinopec Financial Institutes
Comprehensive Credit Facility from Banks(Not for loan)
Credit Facility from Financial Institutions
RMB:Million
SINOPEC OILFIELD SERVICE CORPORATION
SSCAnalysis of Accounts Receivable and Inventory
16
14,769
9,318
0
2000
4000
6000
8000
10000
12000
14000
16000
Inventory
2015 2016
Changes in Accounts Receivable
RMB:Million
Changes in Inventory
RMB:Million
27,121
23,908
0
5000
10000
15000
20000
25000
30000
Accounts Receivable
2015 2016
41,890
33,226
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
Accounts Receivable +Inventory
2015 2016
Changes inAccounts Receivable + Inventory
RMB:Million
SINOPEC OILFIELD SERVICE CORPORATION
SSC
22
17
RMB : Million
Project Expected InvestmentInvestment of
2016Accumulated Investment
Kuwait Drilling Project 1,600 336..4 1,031.4
25 Meter Drilling Platform Construction 466 61.9 312.9
8000 HP Multi-Purpose Vessel 195 34.0 172.0
LOGIQ Image Logging System 120 5.00 112.2
Downhole Test Equipment 139 0.00 139.00
Top Drive Equipment 110 0.00 110.00
Coiled Tubing Equipment 80 0.00 70.8
Pipeline Construction Equipment 530 3.9 39.7
Supplement of Working Capital 2,713 0.00 2,712.52
Total 5,953 441.2 4,700.6
RMB : Million
Usage of Proceeds
4,700
1,253
Used
Unused
Usa
ge
of P
roc
ee
ds
Pro
jec
ts Allo
ca
tion
s
SINOPEC OILFIELD SERVICE CORPORATION
SSC
Section 3. 2017 Outlook
SINOPEC OILFIELD SERVICE CORPORATION
SSCIndustry Outlook
19
Brent Crude Oil Outlook Predicted CAPEX of Major Upstream Enterprises
Source:website of companies, Wood Mackenzie, ended on March 6th 2017
Source: Deutsche Bank Research, ended on March 6th 2017 、UBS研究* based on 2H16 forecast ** as on March 6th 2017
21.5 22.0
18.2
16.0
10.1 10.0
4.7
18.3
23.6
20.8
16.5
11.0
8.7 7.3
0
10
20
2016 A 2017E
(USD/Barrel) (Billion USD)
Impacted by low oil price, more M&As and more polarization among oilfield service companies
Competitive advantages of oilfield service majors: leaner and healthier structure, enhanced management, higher efficiency and lower costs
Changes
in
Oilfield
Service
Industry
SINOPEC OILFIELD SERVICE CORPORATION
SSC2017 Work Volume Plan
20
Geophysics Drilling
Logging & Mud Logging Downhole Operation Engineering Construction
Drilling Footage(10,000m)
Completed Contract(RMB 100 million)
Downhole Operation(well times)
Mud Logging Footage(10,000m)
Standard Meter for Logging(10,000 m)
2D Seismic(km) 3D Seismic(km2)
14,172
26,100
0
5,000
10,000
15,000
20,000
25,000
30,000
2016年 2017年
551
746
0
200
400
600
800
2016年 2017年
15,870
21,553
0
5,000
10,000
15,000
20,000
25,000
2016年 2017年
531
678
0
100
200
300
400
500
600
700
800
2016年 2017年
4,396
5,448
0
1,000
2,000
3,000
4,000
5,000
6,000
2016年 2017年
121126
0
20
40
60
80
100
120
140
2016年 2017年
12,641
16,100
0
5,000
10,000
15,000
20,000
2016年 2017年2016
20172016201720162017201620172016
20172016201720162017
SINOPEC OILFIELD SERVICE CORPORATION
SSC
21
Expand Market in Full Steam
Insid
e
Sin
op
ec
Do
mestic
Ou
tside
Sin
op
ec
Overse
as M
ark
et
Provide service to the exploitation and exploration through on-site service, optimization of
exploration scheme, crews and equipment, to stabilize the market share.
Provide service to Sinopec key projects such as Fuling 10 billion m3 Capacity Construction ,
Chuanxi Marine Facies Gas Field, Ebei Tight Gas Reservoir Exploration, Wen 23 Gas Storage
Construction, South Line of Xin-Yue-Zhe Pipeline, EOR Project in east mature oilfields and
geothermal utility projects etc.
Develop comprehensive service projects and unconventional oil & gas projects. Consolidate
“well factory” integrated service mode with Yanchang Group and Guizhou Energy Agency. Follow
up with oil and gas exploration of BEIHC.
Expand shale gas market in Oil and Gas Center of China Geological Survey, Huaneng, Huadian
and Chongqing area, leveraging proprietary technology in shale gas development.
Develop coalbed methene (CBM) and geothermal market in Shanxi, Shaanxi and Guizhou.
Planned new contracts valued 2.43 billion USD and completed contracts valued 2.16 billion USD in 2017. Wellbore: focus on execution and renewal projects under way in Saudi Arabia and Kuwait; ensure smooth operation of new rigs in Algeria; advance cement, mudding and other service in Saudi Arabia; promote projects in Kuwait such as integrated development of heavy oil blocks, recovering marine oil onshore and deep well drilling, workover and mud logging. Geophysics: enhance integrated acquisition, processing and interpretation service capability, focus on Algeria, Saudi Arabia, Bolivia and Egypt. Comprehensive service: promote the comprehensive service mode in Ecuador. E&C: focus on construction of oil, gas and water pipeline, oil and gas processing station, road and bridges, tanks. Enhance engineering, procurement and EPC management capability.
SINOPEC OILFIELD SERVICE CORPORATION
SSC
27
Deepen Reform and Restructuring
22
Restructure overseas management organization and unify management of crews to optimize allocation of resources such as staff, fund and material.
Integrate overseas management in market development, project management, supporting service, performance appraisal, finance & taxation planning and team building to realize centralized management of overseas business and tiered decision-making mechanism.
Establish four management tiers, namely corporate headquarter – regional/specialized companies – affiliated subsidiaries - project teams. Reinforce management capability of corporate headquarter. Enhance performance capability of regional/specialized company.
Press ahead with restructuring affiliated subsidiaries with similar business. Streamline management level between affiliated subsidiaries and project. Realize the number of affiliated subsidiary and functional departments reduced by over 25%.
Take Shengli Company and Zhongyuan Company as pilot companies of comprehensive reform.
Reinforce core business such as wellbore, geophysics, comprehensive service, featured products R&D and manufacture, drilling technical service.
Outsource non-core business such as pre-drilling construction, equipment maintenance, support service etc. Push forward transformation and foster geographic information mapping, pipeline MRO and energy
conservation business.
Based on market and business layout, obsolete crews of low efficiency, restructure crews of similar business and control total number of crews, to reduce 79 crews.
Optimize labor structure and make an extra 200 million Yuan through output of labor service.
Adjust Crew Structure
Reform on Corporate and Regional Level
Optimize Business Structure
Reinforce Overseas Management
SINOPEC OILFIELD SERVICE CORPORATION
SSCTap Potential Actively
23
Planned Capital Expenditure of 2.43 Billion Yuan in 2017 Carry out cost control measures strictly in
reduction of administrative expense,
operational cost , procurement cost and
outsourcing cost, get benefit from
strengthening project management and
labor output.
Construct “six systems”, i.e. decision-making system , production and operation system, financial budget and accounting system, classification analysis system, operation evaluation system and accountability system to reinforce risk control and the full life cycle management.
Take tailor-made measures on losing-money projects, set up reward and punishment system.
Improve market-based remuneration system. Strengthen performance-based appraisal,linking employee remuneration with profit, revenue from the market outside Sinopec and fund collection.
458.93
700.90
35.00 97.94 115.99
277.33
746.90
Geophysics
Drilling
Logging & MudLogging
Downhole
EngineeringConstruction
Offshore
Others
RMB : Million
SINOPEC OILFIELD SERVICE CORPORATION
SSC
SINOPEC Research Institute of Petroleum Engineering
Enhance Technology Innovation
24
Focus on key topics and accelerate the transformation of scientific research achievement
Based on promoting technology innovation, improve SSC R&D mechanism
Cultivate featured core technology and promote transformation & upgrade
Shengli R&D center, Zhongyuan R&D center, Geophysics R&D center, Jianghan Oil and Gas Test Tech Center, Southwest Acid Oil and Gas Field Tech Center ;E&C Design and Innovation Center
Tackle supporting technologies of exploration and development in deep shale gas, ultra-
deep well drilling, acidic oil and gas, shallow sea , etc.
Generalize the use of safe & optimized drilling technology for deep well and ultra-deep
well, Lost circulation prevention and plugging. Popularize the application of customized
drill bits, near-bit geo-steering system, MWD bearing 175。
C, SINOWSL Mud Logging Unit
system.
Debottleneck technologies such as the Rotary Steerable System, imaging tool used in
LWD, high performance dynamical drilling. Develop high temperature fracturing fluid and
acid fluid key addictive. Carry out pilot experiment for network imaging logging system.
Accelerate environment conservation technologies like harmless treatment and recyclable
use of wastes, pipeline MRO and CCUS (CO2 Capture, Utilization and Storage)
SINOPEC OILFIELD SERVICE CORPORATION
SSCQ&A
25
Investors Relationship
Tel:+86 10 5996 5998Fax:+86 10 5996 5997
Mailbox:[email protected]
http://ssc.sinopec.com